Form 1099 Filers Face a Bumpy Ride

Posted on Wed, Dec 18, 2019 ©2021 Drucker & Scaccetti

tax-1099-form-e1451949285146By: Eric R. Elmore

 

Recent tax code changes were supposed to make filing easier. Now the IRS is reviving Form 1099-NEC, Non-employee Compensation, which has been absent since 1982. It’s aimed at reducing confusion, but does it really? Here’s how and when this latest change may affect you.

 

With the reinstatement of Form 1099-NEC, the IRS is truly trying to simplify filing, but sometimes the Service can’t get out of its own way. The revamped form will replace certain parts  of Form 1099-MISC, which is  a one-size-fits-all contractor filing mechanism.  This change presents timing and deadline challenges for filers.

 

Since enactment in late 2015, the Protecting Americans from Tax Hikes Act (PATH Act) requires employers to provide some Forms 1099-MISC  to contracted personnel by January 31. The employer due dates for other Forms 1099-MISC  were not changed. So, while the due date for some Forms 1099-MISC  was January 31, others were due on February 15. This confused both taxpayers and employers and made for messy follow-up and tracking by the IRS. Consequently, it paved the way for the return of Form 1099-NEC to report non-employee compensation for independent contractors and freelancers. This form is expected to make its debut for the 2020 tax year.

 

The new reporting landscape looks like this:

 

Scenario #1 - Non-employee Compensation to be Reported:

  • File Form 1099-NEC with the IRS and the recipient by January 31, 2021

Scenario #2 - Miscellaneous Income OTHER THAN Non-employee Compensation to be Reported:

  • Send Copies B and 2 of the 1099-MISC to the recipient by January 31, 2021.
  • File Copy A of the 1099-MISC with the IRS by February 28, 2021 (paper only).
  • Electronically filed forms are due March 31, 2021.

Extensions for Forms 1099-MISC reporting NEC may be granted because of a catastrophic event, fire, casualty, natural disaster, serious illness, or unavoidable absence of the individual responsible for the filing.

 

For more clarity, see the IRS website for the form’s instructions.

Topics: deadlines, Form 1099-MISC, 2020, NEC, Non-employee compensation, PATH Act

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